Hong Kong: Hong Kong’s leading air carrier Cathay Pacific Airways swung to profit in the first half of 2009 as fuel-hedging gains made up for a 27% drop in revenue.
Chief executive Tony Tyler said that the decline in demand had bottomed out, but warned of further difficulties ahead, with fuel prices remaining a concern.
“The global aviation industry, hit hard by soaring fuel prices in 2008, is now having to confront one of the most severe demand downturns in living memory,” he said in a statement released by the Hong Kong stock exchange.
He said: “There are cautious signs that the fall in demand has bottomed but there is, as yet, no indication when a sustained pick-up will begin.”
He said that Cathay had taken measures to weather the slump but would take further steps should the cost and demand situation not improve.
Low-end of forecast
The airline, Asia’s No.4 carrier since being overtaken by Japan’s All Nippon Airways in the No.3 spot, reported a net profit of HK $812 million ($104.8 million) for January-June, compared with a loss of HK$760 million a year earlier.
The six-month result falls at the lower end of analyst forecasts, which ranged from HK$400 million to HK$3 billion because of widely varied estimates for fuel hedging gains.
Turnover fell 27% to HK$30.9 billion.
Cathay’s fuel-hedging contracts in the first six months yielded mark-to-market gains of HK$2.1 billion, compared with a loss of HK$7.6 billion for full-year 2008, the company said in the statement.
The airline industry continues to face strong headwinds.
Singapore Airlines, the world’s second-largest airline by market value, last week announced its first quarterly loss in six years, and warned that it could post an annual loss if adverse conditions continued.
Cathay Pacific continues to take delivery of new, more efficient aircraft, with two more Boeing 777-300 extended range aircraft entering the fleet in the first half and the last of six Boeing 747-400 extended range freighters arriving in April.
At the same time the airline had accelerated the retirement of its older, less fuel-efficient Boeing 747-200/300 classic freighters, it added.
Shares of Cathay, a unit of conglomerate Swire Pacific Ltd, were up 2.4% at HK$12.94 at the end of the morning session. The stock has risen by 48% this year, outperforming the broader market’s 44% gain.